Company based outside Zurich in Switzerland. Listed in Stockholm. Invests in non-performing loans mostly in Eastern Europe. The Company was listed mid-2014 after which they had a misadventure in Russia where they lost a lot of Money due to a weakening Ruble having borrowed in EUR.

Investment thesis:Looks like the Company is reaching critical mass, and is decreasing the cost of funding quickly. They just replaced their outstanding bonds at 14% with a new one at 9,5% fixed to 2020. The mgmt says they can double the loan portfolio without driving costs. There should be a good market for buying loans from european banks who want to decrease capital needs. They have been Active in the market for about 10 years, and seem to have developed good relationships.My Quick valuation is their valuation is -25% to -50% cheaper on metrics than bigger listed competitors like B2 Holding and Hoist Finance.Scalable business model where they are focused on their core competence of valuing the portfolio and outsource the debt Collection.Two young driven guys running the Company backed by two founders who have been Active in the industry for a long time.

Risks:It wouldnt be far fetched for them to issue more Equity to speed up growth which would probably depress the price temporarily. More Money flowing into the market leading to worsening yields. This will surely happen but not too quickly at the smaller size portfolio the Company is working with. Increasing costs for outsourcing the debt Collection.

Have been listening in on their conf-calls for a couple of years but this is the first time I've choosen to buy in any size.

I have the same question about this company as I had about Lancashire Re:

"If much of the value propositioin revolves around two bright, young guys, what's to stop those bright young guys from walking down the street and starting up a competitor? And, if they do so, what's the remaining value of DDM?"

Well. One thing is they have a decent amount of stock, like 4%. The other thing is the business model needs more capital than they have on their own, so why not work with the capital they already have access to? It's not like Writing an iphone app which needs no capital.

In the capital markets trust is key and from their lowering borrowing COSTs it seems the trust is growing, leaving would probably be a set back in that respect.

Also if they tried on their own they wouldn't have access to the network/knowledge of the founders which own 40% and have been Active in these markets for a longer time.

I don't know? Maybe they're just being small and nimble and not competing? Their deals aren't that big, the biggest portfolio they bought was 17 MEUR in Slovenia. I can see the share being more than a triple if they reach 100 MEUR in AUM which shouldn't be impossible in 1-2 years. But if you have any hints of where to read up on distressed debt markets its more than welcome, I'm clueless:)

I met with Kent Hansson in late 2014. Very impressive guy. Ex IJ if my memory serves. He felt his data analysis capabilities gave them an edge on pricing really obscure stuff in Russia, etc. really quickly. And sometimes sellers wanted to move very quickly which was to their advantage. Again, paraphrasing him. We didn't invest.

Good decision mateo:) Hopefully they learned a lesson from their adventures in Russia, but I'll watch out for overconfidence signs..btw, who are "we"?

Agree Jurgis that there's a blow-up risk. But I can accept a blow-up risk for 5% of portfolio which is fairly non-correlated to other investsments (I have 85% outside financials) as long as the upside is big.

I met with Kent Hansson in late 2014. Very impressive guy. Ex IJ if my memory serves. He felt his data analysis capabilities gave them an edge on pricing really obscure stuff in Russia, etc. really quickly. And sometimes sellers wanted to move very quickly which was to their advantage. Again, paraphrasing him. We didn't invest.

What were your core reasons for deciding not to invest?

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